Britain can still escape the OECD’s radical plan for permanent worldwide socialism

 We are proposing to amend UK law, to give ministers an emergency brake on new global tax rules

Source - Daily Telegraph - 18/06/23

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When more than 140 countries signed-up to the OECD’s 2021 agreement to impose a worldwide minimum corporation tax rate, the move was presented as a victory for “progressives”. They greeted it as a landmark agreement that would prevent a “race to the bottom” in which countries tried to out-do one another with tax cuts for multinationals.

What few highlighted at the time was the imbalance in the OECD plan. Sovereign nations were to be banned from taxing larger international firms at a rate of less than 15 per cent – but no such restraint was proposed when it came to subsidies. The approach could be summarised as “tax-cuts bad, taxpayer-funded subsidies good.” This combination is dangerous for Britain. While this country can engineer competitive tax rates, the UK’s size relative to China and America means we can never hope to match them in a subsidy race. It is not going too far to say that the OECD’s radical plan threatens to tilt the world Left-wards, forever.

The OECD and its defenders seem to fear tax competition. That in itself betrays a particular mindset – one that is wilfully blind to the ways in which competitive tax rates can boost jobs and economic growth. Similarly, the OECD mindset sees no problem with Big Government and Big Subsidies. Its personnel forget the experience of the 1970s, when taxpayers’ money was squandered, with cash pumped into rather more losers than winners.  

Make no mistake, the OECD minimum tax plan means a return to the bad old days when western governments metaphorically put a finger in the dam and wished away innovation, competition and advance. To make matters worse, the OECD has failed to answer almost all the key questions about its plans. Who will police them – a new worldwide tax authority? What sanctions await those who game the system? Do we trust China to abide by the rules? The OECD is discussing ideas for assessment panels. It is possible to imagine a committee including Chinese and Russian officials flying into Britain to rule on its sovereign tax affairs once the deal is up and running.

For all these reasons, US Republicans are growing ever more hostile to the plan. They hold a majority in the House of Representatives and are preventing the Biden administration from implementing it. The Republican chairman of the House Ways and Means Committee, Jason Smith, and his allies are even threatening retaliation against any country that uses the framework to impose top-up taxes on US companies.

The British Government has signed up to the OECD regime and plans to implement it from January. But other important international competitors have seen these problems. Some are backing away from the details of the plan as a result. Global financial centres like Hong Kong and Singapore have delayed implementation until 2025, a year later than the OECD’s demand for the new regime to start when New Year 2024 is rung in. The EU has unilaterally broken with the agreement and given many of its member states the right to delay implementation by up to six years.  

In the face of all this, a group of concerned colleagues and I are calling on the Treasury to at least consider delaying implementation of the OECD regime in Britain, beyond the January 1 2024 date in the current Finance Bill. We shall lay an amendment to the Bill seeking to give Treasury ministers additional powers, so that they can change course later this year should they come to accept that the OECD plan is far from ready for implementation.

As a former Treasury minister, I appreciate how difficult it can be to start adjusting a Finance Bill. Our amendment is designed to be helpful and easy to adopt. We want ministers to have extra powers allowing them to apply an emergency brake, should they come to accept the arguments that we and others internationally are now making. With the OECD plan still absent key details and support for it fraying in America, taking on this reserve power is surely only prudent.